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"Free Webinar: "10 Steps to Prepare and Sell Your Business"
Did you know that over half of small and mid-sized businesses never sell when they are put on the market? Selling a business is not like selling a piece of real estate or any other type of asset. Join us at a free webinar for business owners who are thinking of selling their business and need to know how to prepare and follow-through to be successful and maximize their proceeds. Even if you're just starting to think about it, it's more crucial than ever for owners to plan ahead to optimize the value of their company, and take advantage of market conditions and timing to get the most out of selling their business.
Target Audience: business owners and executives of small to mid-sized companies
Date: August 25, 2011 (Thursday)
Time: 10 AM to 11 AM (Central)
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Standards eased, SBA loan demand up
Based on an article in Austin Business Journal, 5/10/11
Banks continued to ease standards and terms for business loans in the first quarter of 2011, according to a Federal Reserve Board survey of senior loan officers. About 25% of banks reported increased demand for commercial and industrial loans from large and middle-market firms. About 10% reported stronger loan demand from small businesses. More than 1/3 of the banks surveyed reported increased demand for commercial real estate loans. The credit quality of potential business borrowers also improved. More than half of domestic banks said the credit quality of large and middle-market loan applicants had improved, while 35% said the credit quality of potential small business borrowers had improved.
Other surveys have shown increased demand for small business loans in recent months. Lending to small businesses increased 12% in March compared with the same month a year ago; 59% of small businesses applied for a loan during the past 12 months.
Through the first seven months of its fiscal year, lending through the SBA's 7(a) loan program was up 53% compared with the same period a year ago. Despite the big jump in the dollar volume of 7(a) lending, the number of small businesses taking these loans was about the same as last year - 33,836 so far this year vs. 33,650 during the same period a year ago. Due in part to an increase in the maximum size limit for 7(a) loans, the average 7(a) loan this year is $389,027 versus $254,852 during the same period a year ago. | | |
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Private Equity on Software Buying Spree
165 private equity (PE) investors have been involved in 256 software deals since the beginning of 2009. The industry is continuing to see strong PE investment activity with 50 deals already completed through May 2011, compared to 95 deals in 2009 and 111 in 2010. Thanks to several large deals this year, the median deal size has jumped to $126M vs. $35M last year. An estimated 165 PE investors are actively buying software companies.
Source: PitchBook Data, Inc. | |
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We just returned from the annual CompTIA member conference in Washington, D.C. As a founding member of the IT Business Growth Professionals community within CompTIA, we are working with colleagues who are helping IT companies to address the challenges they face on the path to growth and success. While we focus on financial coaching and M&A services, our peers offer coaching in marketing, sales, service delivery, and other areas.
If you're in the IT industry and are interested in joining CompTIA, contact us to find out how you can become a full member and get a ton of benefits for only $150 (normally $250) and get one of the great deals of the year. Some of the benefits will easily pay for the cost of membership. We'll describe the benefits in a future email.
If you own a business and would like to learn more about selling your company, buying another, or optimizing your business for a future transaction, let us know how we can help. A great place to start is our next webinar on August 25.
John W. Austin and Bob Dale
info@austindalegroup.com
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Confidentiality: The Catch 22
There is a Catch 22 between maintaining confidentiality and contacting potential buyers. It's the old saying, "You can't sell anything if you can't talk to anyone." Sellers seem to be overly concerned that they will lose customers and employees. The seller should certainly be concerned, but not to the point of panic. Here are a few pointers to help in maintaining confidentiality.
Do the Deal Quickly
Keep as short a timetable as possible. Get the details done as fast as possible. Make sure the outside advisors, accountants, attorneys, etc., understand that time is the deadly enemy, not only of confidentiality, but also of a successful closing. There is much truth in the statement that the longer the deal goes, the less likely it will close.
Have a Reasonable Explanation
In case confidentiality is breached, have a reasonable explanation for it. What happens when an employee confronts the owner with, "Are you selling the business?" One answer might be. "Everything is for sale at the right price. But, no one will ever pay what I want for this business."
Showing the Business
It is difficult to have a prospective buyer looking at the business without drawing attention. Ask your insurance person, banker, supplier, etc., to visit the business so you can get employees used to seeing visitors.
Dealing with the Information Flow
There will be a big increase in paper flow. It has to be handled confidentially. Paperwork shouldn't be left on a desk or anywhere that employees can see it. Phone calls should be handled by cell phone and out of sight from everyone. A big increase in telephone activity can raise questions. Emails and other correspondence should be placed in locked drawers.
Remind Prospective Buyers
Buyers should be cautioned continuously about the need for confidentiality.
An Important Point
A professional intermediary can go a long way in protecting confidentiality. They are experienced in doing so and are aware of its importance. They can be the difference between possible leaks and maintaining confidentiality. Use one! |
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Setting the Rules for Confidentiality
Following are some of the questions that you, as a seller, can expect a confidentiality agreement to cover:
- What type of information can and cannot be disclosed?
- Are the negotiations open or secret?
- What is the time frame for which the agreement is binding? The seller should seek a permanently binding agreement.
- What is the patent right protection in the event the buyer, for example, learns about inventions when checking out the operation?
- Which state's law will apply to the agreement if the other party is based in a different state? Where will disputes be heard?
- What recourse does the seller have if the agreement is breached?
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Are You Ready for Due Diligence?
Too many owners think that selling their company is as easy as finding a good intermediary and then waiting for the offers to come in. Buyers want full disclosure when it comes to the due diligence phase. Actually, "bad news" should be delivered to the potential buyer right up front. Delays in providing this information can cause the buyer to wonder, "What else is the seller not telling me?"
Due diligence can become a colossal nightmare for the seller who has not taken the time or dedicated the resources for preparing all of the necessary disclosures prior to a term sheet or offer.
By not gathering all of the necessary information that a potential buyer would want to see, the seller leaves himself or herself open to continued requests for material and is always behind in supplying it. The buyer then continues to require materials concerning such areas as:
- threatened litigation,
- environmental risks,
- tax issues,
- undisclosed liabilities,
- title to intellectual property,
- employment agreements,
- condition of assets, etc.
Attempting to hide something from a potential buyer is a sure way to destroy the deal. Not having the information available or providing surprising disclosures late in the game forces the buyer's attorney to demand or strengthen all kinds of representations and warranties that would have been unnecessary if the information had been provided in a timely manner.
By not sharing all of the information or providing answers to questions a buyer might want answered prior to the selling process, the owner is then likely forced to ignore the daily operation of the business. This may lead to a downturn in the business so a potential buyer will reconsider the price, the terms of the sale, or even reconsider the purchase itself.
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